Extension of the Coronavirus Business Interruption Loan Scheme (CBILS)

Following on from my initial note on CBILS and a lot of scrutiny within media, the government on Friday 3rd April 2020 expanded the scheme to make it more accessible to SME businesses and also announced the Coronavirus Large Business Interruption Loan Scheme (CLBILS) which is targeted at larger businesses.

The key change to the CBILS has been to remove both the requirement for a business to have been unable to access a loan on normal commercial terms prior to accessing the scheme and the requirement for the lender to establish a lack, or absence, of security for loans over £250,000.

Loans under CBILS will now be more accessible to SME businesses as lenders no longer require to first offer an alternative or make an assessment of the available security prior to accessing the scheme.

The remaining criteria for the scheme remain the same and the lender must still establish the business is viable in the longer term and the loan will enable the business to trade out of short-term difficulties caused by COVID-19.

It is important to note the position in respect of the requirement for personal guarantees and the following clarification has been provided by government:

for loans of up to £250,000, lenders are not permitted to take personal guarantees; and

for loans over £250,000, lenders are permitted to take personal guarantees (at their discretion) up to 20% of the level of the CBILS loan.

Lenders can still however take other security over the business which may be available to them although they cannot take security over a guarantors private dwelling house.

Addition of CLBILS

As noted above the government has announced a new CLBILS for larger companies with an annual turnover of between £45 million and £500 million. The new scheme will provide a government guarantee of 80 per cent of the facility amount to lenders to enable them to make loans of up to £25 million to businesses. The Government has stated that further details will be available later this month.

It is encouraging to the see the expansion of CBILS and the introduction of the new CLBILS but it is crucial that both schemes are administered efficiently to allow for business to access the loan monies as quickly as possible in order to counter the impact on businesses of COVID-19.

If you have any concerns or queries arising from the above, please contact Douglas Anderson douglas.anderson@tughans.com or your usual Tughans contact, who will be able to refer you

While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.